HYLA Blog

In the mobile and telecoms industry, February is dedicated to one thing—Mobile World Congress (MWC). As the world’s largest event for the mobile industry, attracting over 100,000 attendees and more than 2,300 exhibitors, MWC is an event that simply cannot be missed.

Covering everything from 5G to IoT to AI, mobile media, blockchain and GDPR, MWC will see industry experts discussing and debating the developments in the mobile ecosystem.

Of course, this also includes the advancement of mobile devices themselves. And, surprisingly, previously owned devices too.

The $17 billion pre-owned device market

It may come as a surprise, but the market for pre-owned devices is actually growing faster than the market for new devices. While the ecosystem for pre-owned devices started as a convenience factor for operators, it’s a market that’s growing 50% year on year. And it is delivering lucrative revenues for operators, driving customer acquisition and strengthening retention. In fact, Deloitte estimated that more than 120 million smartphones would be traded in 2017, each worth on average, $140 per device.

This represents big business, which is why retailers, OEMs, and insurers are also looking to capitalize on it. The reason it is growing so rapidly is because it’s a market where everyone wins:

Operators are using the latent value in old devices to compensate customers and encourage them to upgrade to new devices while creating customer stickiness of increased sales of products and services

OEMs like Samsung, Apple and Google are following suit, and are launching device buyback programs so they too can reap the benefits from trade-in programs and pre-owned devices

Retailers are offering trade-in programs to draw more people into stores and to help drive sales

Insurance companies are using reconditioned devices as part of claims fulfillment to manage costs

The environment benefits from sustainable practices, as devices are kept out of landfill

And finally, the consumer gets money for something they perceive as worthless and which they use towards other products and services.

While the ‘feel good factor’ of trade-ins can be shouted about from the rooftops, these programs need to be put in the context of the current mobile climate. Not only have there been reports of declining global shipment figures of the iPhone range, but annual smartphone shipments in China declined for the very first time.

There are a couple of reasons touted for this. First of all, a lack of innovation means people are holding onto their devices for longer. And, the cost of smartphones is skyrocketing—the iPhone X has a staggering price tag of $999.

But despite this, Apple recently announced record Q1 2018 profits. And sales of its ultra-premium iPhone X were a key contributing factor to its success. How? Analyst firm Canalys has put the success down to device trade-ins—something of which HYLA’s own data also supports.

It’s clear that customers are beginning to realize the value that resides in their old devices, and that they can use this to offset the purchase of a new phone, accessories, or additional services. What’s more, as prices of devices continue to rise (using the iPhone X as a perfect example), it’s no doubt going to be a trend that we will start to see much more of, as customers opt to part with their older device in favor of a new one.

The reality of trade-ins

HYLA Mobile manages various aspects of trade-in programs for operators, retailers and OEMs, and as a result has seen a number of trends in the US:

Device trade-ins are playing an increasing role in facilitating all smartphone upgrades—in fact, $2.156 billion was returned to consumers as part of trade-in programs in 2017

These programs are also increasing the affordability of all devices—especially premium devices (the average smartphone trade-in value is $106, and the iPhone 6 accounted for 40% of the top 5 traded devices)

Consumers are also holding onto their devices for longer. In 2017, US consumers owned a device for 2.59 years (945 days) before trading it in—78 days longer than in 2016 (2.38 years or 867 days).

Knowing your devices’ worth

While the pre-owned device market is growing and getting stronger, operators and OEMs must also keep a close eye on residual device values, or risk losing money through associated depreciation. Higher new device prices bring greater levels of depreciation as highlighted by the iPhone X; our data shows the average trade-in value of this super-premium device in 2017 was $614.62, which means it had lost nearly 40% of its value in just 2 months following its launch. Consumers need to be educated about this and take advantage of timely upgrades/trade-ins to maximize value and stay up to date on technology cycles.

By analyzing new device entry price points, competitive market trends along with historical performance, HYLA Mobile provides operators, retailers, OEMs, and insurance companies with a comprehensive view of device values. The SaaS-based HYLA Analytics platform, with built-in market insights, planning, simulation, and evaluation capabilities, enables companies to propose the optimal pricing for trade-in and upgrade programs, ensuring that they remain a profitable customer retention tool for some of the largest carriers, retailers and OEMS in the industry.

What to expect from HYLA at MWC

So, at this year’s MWC, while we will see a lot of the industry talking about 5G, HYLA Mobile will be discussing the important role device trade-in programs are playing in the global mobile industry including the role of such programs in accelerated upgrades from 3G to 4G and eventually 4G to 5G. I will be at the show discussing how the dynamics of the pre-owned phone market will have a critical impact on the prices of new smartphones.

If you would like to meet with HYLA Mobile at MWC 2018, please get in contact here.